Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)]
Based on the information given,the marginal tax rate is

Question

Quizplus · Accepted Answer

The marginal tax rate can be calculated by dividing the change in taxes by the change in income. In this formula, the change in taxes is equivalent to 0.7 times the change in wages, or (0.7)(Wages - Work expenses - Child care costs). As income increases, this proportion also increases, indicating a higher marginal tax rate. In fact, the maximum marginal tax rate in this formula is 70%, since for each additional dollar earned, 70 cents will be reduced from the welfare benefit. Therefore, the answer is choice C.

Use the Following Formula to Answer the Indicated Question: Welfare